JANUARY 12, 2005

The biggest story today was the dollar. It fell about 150 pts ag the Euro.n A record 60 billion dollar trade deficit was to blame. This is truly incredible. Of course the weak dollar pushed gold up $3.90. Neither seemed to help gold stocks much, maybe because they had a nice bounce the last two days. A weak dollar has been and is good for stocks, until the Fed tries to prevent it with sharply higher rates. So perhaps it was partially respoonsible for the late day rally we got. You can't call it more than an oversold rally so far. Nothing seems to matter to bonds. They had a five year auction today, oil fell then rose $1.50 and the selloff in the aforementioned dollar, could not get them excited.

As I mentioned several days ago, Treasury wants a lower dollar to help correct the trade deficit, protect American jobs, and put pressure on europe to help them put pressure on China to revalue or better yet float the yuan. Finally today I saw that Bloomberg reported European Central Bank Chief Economist, Otmar Issing suggested yesterday that Asian nations must let their currencies strengthen to help shrink the U.S. trade deficit. Considering the awful relations we have had lately with our allies, this is big stuff. They are finally tired of taking all the heat. Now that the door has been opened, we should start hearing a lot more of this. Remember just recently when Chin a chided us that it is our problem and we should get our house in order. Its finally not just us whining. The flip side of this that I did hear reported on CNBC, is that today China reported a 33% increase in their exports, which widened their trade surplus in december to a record 11.1 billion. Finally, the U.S.-China Economic and Security Review Commission, a congressionally appointed panel released a report that estimates imports from China displaced 1.659 million jobs between 1989-2003 while exports generated only 199,000 additional U>S> jobs. All you stock, bond, gold and oil traders, this very likely will be the big issue of 2005.